#$vrx

With Q3 earnings season all but over, investors can rejoice in the gains that were reported during the quarter. Earnings and revenue came in higher than a year earlier with future estimates expected to build on this success. But as earnings season typically goes, there will always be a handful of loser that disappoint shareholders. For the fourth quarter they include Baidu, Abercrombie & Fitch, Valeant, Ford and Amazon. According to the Estimize data these names are trending downward, owing to decelerating or negative year-over-year comparisons, downward revisions and a history of missing expectations. The combination of these factors have typically led to a significant underperformance in the stock.

Baidu (BIDU) Information Technology – Internet, Software & Services

Investors are slowly losing hope that Baidu will ever come close to Google’s success in the United States. The oft referred to Google of China is coming off yet another disappointing quarter. Earnings climbed by 4% after 4 consecutive quarters of negative growth. Revenue on the other hand, slid 5% due to higher acquisition, bandwidth and content costs. Baidu’s offline to online model coupled with lower interest from advertisers to use the search engine have taken the biggest toll on results lately. On a positive note, Baidu is prepared to test its first self driving car in the coming weeks. If Baidu can successfully develop and deploy the first wave of driverless vehicles that could cause investors to overlook its weak search business. Nonetheless, the Estimize community is pessimistic about the fourth quarter. Analysts are calling for earnings of 90 cents on $2.57 billion, reflecting a 12% decline on the bottom line and 5% on the top.

Abercrombie & Fitch (ANF) Consumer Discretionary – Specialty Retail

Abercrombie has a knack for disappointing investors given its recent string of disappointing quarterly results. The teen retailers is clearly having trouble navigating this retail environment that favors fast fashion trends and discounters, both of which do not represent Abercrombie’s core offerings. Meanwhile mall based traffic continues to see a sharp downturn due to the proliferation of online channels.  The third quarter featured many of these ongoing trends as same store sales dropped by 6% across U.S. and international locations. Hollister stores were the lone bright spot during the quarter, delivering flat growth from a year earlier and only a 1% decline in comps year to date. Estimize contributors are down on the retailer’s performance during the key holliday months. Analysts are calling for earnings of 81 cents, 6% lower than a year earlier. That estimate has dropped 27% in the past 3 months. Revenue for the period is forecasted to drop 4% to $1.04 billion.

Valeant Pharmaceuticals (VRX) Health Care– Pharmaceuticals

The Valeant story has been told multiple times over the past year after a pricing gouging scandal caused shares to hit rock bottom. With several new board members, one being infamous hedge fund manager Bill Ackman, and a new CEO, Valeant continues to fumble. Valeant massive debt load along with a weak pipeline have held back most investors from jumping back into the stock. To combat its mounting debt, Valeant is exploring options to sell its stomach drug business for about $10 billion. This would handle a large portion of its bank loans and remove a big area of concern for prospective investors. What it won’t do is boost financial performance which analyst’s forecast to edge down in the fourth quarter. The Estimize community is forecasting a 30% decline on the bottom line to $1.66 per share and 10% on the top  to $2.43 billion. Shares are down nearly 85% from a year earlier and historically drop an additional 2% immediately following an earnings report.

Ford (F) Consumer Discretionary - Automobiles

While General Motors continues to thrive in this current  environment, Ford’s experience has been the exact opposite. The company is coming off a third quarter report that featured a 42% decline on the bottom line along with flat growth. Ford’s mishaps come amid a pullback in production across North American markets. Domestic markets should continue to see some downside as gas prices and interest rates are set to rise in the coming months. Meanwhile currency headwinds will take a toll on international performance, which had held together quarterly results lately. The Estimize community believes Ford will its decline during the fourth quarter. Analysts are forecasting a 31% decline on the bottom line to 37 cents per share on a 6% drop on the top to $35.71 billion.

Amazon (AMZN) Consumer Discretionary - Internet & Catalog

Amazon doesn’t frequently make an appearance on lists that touch on losers or most likely to miss earnings estimates, but the upcoming quarterly results appear to be stacking up against the online retailer. Amazon is coming off a relatively lackluster third quarter that featured a missed on the bottom line and revenue in line with consensus estimates. For a company that so frequently smashes analyst’s estimates this was the equivalent missing by 10%. Furthermore, guidance for the fourth quarter came in slightly below expectations mostly due to weak operating income and margins. Amazon’s ongoing initiatives to expand in almost every facet of its business will inevitably put pressure on margins which is seeing downward revisions activity of late. Earnings estimates dropped by 30% to $1.54 following its weak third quarter results with revenue largely in line with previous forecasts. It's becoming more apparent that investors expect nothing short of the best from Amazon where despite its greatness, certain financial metrics are simply unattainable.

How do you think these names will report? Be included in the Estimize consensus by contributing your estimates here!

So the markets love Hillary Clinton?

No, the markets were building in a Trump victory and the news from the FBI that there would be no indictments from these new emails makes voting for Hillary seem less futile, which is why we rallied.

Today Joe Kernen asked me in my morning crosstalk with him before "Squawk on the Street" whether I missed just talking about earnings.

What a blessing of a question because I sure do. I long for the market to be, well, the market again, where we value companies on how well they are doing, not as part of a vast basket that goes up or down depending upon how certain we are about the White House.

I admit that for the first time in about 30 years I didn't even crack open the charts book, or at least didn't bother to download the charts that the S&P 500 sends me each weekend.

What was the point, I figured? We don't know who is going to win so we don't know what we should be looking at.

But if the futures are right, and there is a lot of money betting that way, and this isn't like Brexit where so many people got it wrong, then we are going to return as we normally would after this week and ask, "Ok, who had good earnings and who didn't?" That's right, we will begin to make judgments about companies themselves, not about the ballot box.

So who did the best so far, keeping in mind that we still haven't heard from the retailers, which is this week's business?

First, hands down, it was the banks. They simply generated much bigger profits than we thought possible. JPMorgan Chase delivered a stellar quarter with excellent loan growth, good sales and trading and some excellent merger and acquisitions advisory. Just superb.

Bank of America blew out the numbers and built out a ton of capital. I thought that both loan growth and credit concerns were about as great as you can get. Deposit growth remains strong.

Citigroup may have been the biggest upside surprise, both in earnings and in prospects for the future. It has a book value that is scrubbed clean and it's got $15 points of upside just to catch up to the rest of the group.

Goldman Sachs and Morgan Stanley delivered excellent numbers and can still travel far before they run out of gas.

The regionals had extraordinary numbers and I would highlight Key KEY as having the best growth and the best net interest margin. BB&T was no slouch either.

In fact the only disappointment came from Wells Fargo, which not only had one of the most lackluster quarters but is now regarded as the most scandalized of banks. I am grateful that my charitable trust, Action Alerts PLUS, owns shares in Citigroup but horrified that it has a big position in Wells Fargo. We have told club members to Action Alerts PLUS in our bulletins that it can do well in a raised interest rate environment and that's what we will get in December considering the strong employment number that printed on Friday, with the non-farm payrolls report.

Of the soft financials you had to be impressed with numbers from Visa, MasterCard and American Express. All of them were much better than I was looking for and remain reasonably valued given their excellent earnings and guidance.

The second group that performed well? The social mobile and cloud stocks, including Alphabet/Google and Facebook and Amazon discussed elsewhere, but also Adobe Systems, Workday and in many ways, the best of the best, ServiceNow. Best of the best meaning fastest growing. These stocks are widely perceived as not hostage to politics, even as we know that if Trump is elected president we have to presume that some of their international business could be in the line. Let's not forget that the semiconductor companies, with the exception of Intel, had uniformly fabulous quarters and are subjected to oodles of mergers and acquisition talk.

One other darling: Accenture. This consulting company has become the "Teflon Don" of the group.

The next sector's a puzzler: the transports. I can't think of a single rail or airline that made its numbers but I can't think of a single one that won't be better next year and when it's November that's what we care about. I like United Continental as a comeback kid in the airlines and I think that Norfolk Southern truly impressed as a carrier that should have had far worse numbers than it did.

The basic industrials surprised in a lot of ways, but three that stand out are for an increase in Chinese business, a turn in Europe and a robust airline cycle. Boeing was the leader here and I think it can go higher. United Technologies and Honeywell also delivered good numbers.

We got mixed numbers from the consumer packaged goods group and I would call out only PepsiCo and Procter & Gamble as two that really were compelling, both because of excellent top-line numbers, the latter really surprising. They are both buys here.

Energy was profoundly mixed, too. If you had fantastic growth as EOG Resources in the independents or Chevron in the majors you were saluted with higher prices. But if you had no growth or spent too much, think Exxon Mobil XOM and Occidental respectively, you did yourself no favors.

Now let's talk disappointing. The restaurants were miserable. Other than Cheesecake Factory the results were simply nothing to write home about. The group seems to have very little upside. Starbucks was mixed last week. You didn't get the upside surprise we were so spoiled by but it wasn't disappointing. It's being carried up by the tape, I fear, though, and could drop back if the futures take a header. Domino's? What can I say, best in show but it really is a technology company that delivers speedy pizzas. (Visa, Alphabet, Facebook, PepsiCo, Occidental and Starbucks are holdings in Action Alerts PLUS.)

The home improvement thesis took a huge step backward this quarter with weak numbers from Masco, Sherwin-Williams and PPG Industries. I was very let down by that group. I know that Home Depot is still a long-term buy but let's face it, the luster seems lost for now. My charitable trust picked up some Newell Brands after CEO Mike Polk's presentation on "Mad Money" but it seems like only the futures are powering it higher today. I don't sense real buyers, meaning funds that want hundreds of millions of dollars in Newell's stock, just managers who want exposure to equities via the futures.

The apparel segment got hit hard led by Nike and Under Armour, which have gotten into some weird Claymation death match without winners.

And then there's health care. We are getting a nice snap-back rally in the group, which got severely oversold, but it is time to recognize that there are winners and losers in a group that had formerly just had the former. Of the drug stocks Merck delivered the best that I saw and was understated about the possibilities of Keytruda being a true anti-cancer blockbuster franchise. I am still reeling from the lack of respect given to Celgene, although it was able to put up some reasonable amount of points today. Johnson & Johnson reported eons ago and it was fantastic, totally undeserving of the punishment meted out to it. Valeant which reports tomorrow, remains a total mystery.

The cost containers, meaning the health maintenance organizations away from UnitedHealth and the pharmacy benefit managers and the generics, were almost all universally miserable and any lift to me means that you have to examine how yours did in the current quarter but there were more losers than winners.

So, if you look at where the money wants to go, and you figure that this election will pass and a week from now we are going to talk about companies again provided there is no contested election, I think that the above description of the earnings season to date will hold up until year-end. It's where the justified gains are. It's where they will be.

Stock picking is hard. Most institutional and retail stock pickers underperform the indexes. But every investor could improve the likelihood they beat the market by following one rule:

Avoid high profile, controversial companies where an adverse news event could produce an overnight price collapse.

Three stocks have proven the utility of this investing rule in spades: Valeant Pharma, Wells Fargo, and Mylan Labs. All three have been scrutinized for behavior labeled unethical by some and illegal by others, and all three have cost their investors in a big way because of it.

In February, I cautioned that an upcoming Congressional investigation into Valeant’s pricing policies might unveil further malfeasance by the company’s management. VRX was $92 then. It closed at $22 today. While the hearings produced no bombshells, a few weeks later management reported disappointing fourth quarter earnings and drastically lowered earnings guidance for 2017. The stock dropped 40% to $36 in a single day, and has slid lower since.  

Had folks followed my rule, they would have unloaded Valeant as soon as news surfaced that it had a lengthy history of buying prescription and OTC drugs (with money borrowed via multiple Wall Street bond offerings) and then drastically raising drug prices. The stock was still over $200 when these damning stories first emerged. But many investors—including a who’s-who of the hedge fund industry—held onto their Valeant stakes, betting that good times were sure to return as the negative press faded and headline risk abated. Even Wall Street ‘experts’ who openly acknowledged the company’s troubles refused to believe things could get significantly worse.

On September 28th, 2015, with Valeant’s stock still trading for $199/share, Nomura analyst Shibani Malhotra initiated coverage on the company. In a thorough 46-page report, Malhotra rightly called VRX a “controversial company that polarizes investors” and noted its “aggressive pace of M&A, which some perceive as an unsustainable ‘roll up’ strategy.” And yet, Malhotra still rated the company a buy, pegging its upside at $335/share and its downside at a mere $180—only $19 (or 10 percent) less than the stock was trading for on the day the report was issued.

Oops.  

One year later, the rot within Valeant is still being unearthed, and its stock keeps on falling. Just this week Wall Street analyst David Maris dug up another example of quasi-criminal behavior. Apparently Valeant induced doctors to prescribe its second biggest product, the antidepressant Wellbutrin XL, through the obscure mail order pharmacy ‘Direct Success.’ Even though much cheaper generic competitors to Wellbutrin existed, Valeant increased Wellbutrin’s list price 11 times over the last few years to $17,000 annually. Who knows when, or if, another negative story around Valeant is discovered. But with over $30 billion of debt and now shrinking revenues, it’s an extremely risky stock that could very well zero out. Now that is a downside risk.

The recent Wells and Mylan scandals could drag on just as long as the Valeant saga, and potential investors in either company would be wise to remember all the false bottoms we’ve seen in Valeant’s stock since it first started sliding.

Mylan has followed the Valeant playbook: buying a much needed drug and then rapidly raising its price. Because Medicare and Medicaid are often the ultimate payors, a large portion of these price hikes have been borne by American taxpayers. In Mylan’s case the product was the epipen, used to avert anaphylactic shock for folks with severe allergies. Mylan’s CEO, who is among the highest paid CEO’s in America, was criticized for this price gouging at a recent congressional hearing, but she has retained her job, and her eight figure annual compensation.

Wells Fargo had a multi-year program of ‘cross selling’ products, like credit cards, to customers who had not requested them. Last week longtime Wells CEO John Stumpf resigned over the scandal, but not before first blaming, and firing, 5,300 employees and the head of Wells’ consumer operations. I suspect these were not ‘rogue’ employees; just folks following an internal culture that promoted unethical and illegal behavior in order to stay employed. Thankfully, the head of the consumer finance protection bureau, Senator Elizabeth Warren, lambasted Stumpf at a recent Senate hearing.

In all three examples the time to sell was the day these scandals broke. Even today all three stocks should be sold, as headline risk persists. The Mylan story is far from over and Valeant continues to prove Charlie Munger correct when he called it a “sewer.”

Every quarterly earnings season is filled with both winners and losers. Lately the losers have outpaced the victors, with next season shaping up to be another disappointment. Some of the biggest flops are expected to come from big names including Chipotle, Baidu, Valeant, Workday and Pier 1 Imports. According to the Estimize data these names are trending downward, owing to negative year-over-year growth estimates, heavy downward revisions and a history of missing expectations. The combination of these factors have typically led to a significant underperformance in the stock.

Chipotle Mexican Grill (CMG) Consumer Discretionary – Hotels, Restaurants & Leisure

Chipotle is still having trouble getting out from under the numerous health outbreaks starting in late 2015. The burrito chain which was once heavily praised as revolutionizing the fast casual sector is now largely an afterthought to a catalogue of other food chains, one being Shake Shack. Amidst the turmoil, earnings and traffic trends have taken a dramatic downturn. Last quarter comparable restaurant sales decreased a 3.6% on a 16.6% decline in total revenue. In an effort to regain customers, Chipotle has hit the ground running with new promotional campaigns and marketing initiatives. Some of these include Chiptopia which rewards customers for frequent visits throughout the summer. More recently, the company launched free kid’s meals on Sundays and complimentary beverages for students. While Chipotle continues to win back the hearts of its once loyal customers, investors have hammered the stock. Shares are down 9% year-to-date and 40% in the past 12 months.

Baidu (BIDU) Information Technology – Internet, Software & Services

Investors are slowly losing hope that Baidu will ever come close to Google’s success in the United States. The oft referred to Google of China is coming off of its worst quarterly report in nearly 8 years. Earnings reported a 39% decline from the same period last year while revenue dipped nearly 10% over the same timeframe. Baidu’s struggles in the second quarter were primarily driven by sluggish search advertising revenue. This downturn is expected to carry on through the third quarter and the rest of fiscal 2016. Analysts at Estimize are calling for earnings per share of 95 cents on $2.65 billion in revenue. Compared to a year earlier, this represents a 32% decline on the bottom-line and 7% on the top.

Valeant Pharmaceuticals (VRX) Health care – Pharmaceuticals

Valeant was one of the best performing stocks on Wall Street in the first half of 2015, but over the past 12 months price gouging initiative have sent shares plunging. After reaching highs of over $250 per share, the stock has plummeted over 90%, to all time lows where it is today.  The ongoing freefall forced management to oust now former CEO Michael Pearson, who led the company through the thick of it's price hikes. WIth several new board members, one being infamous hedge fund manager Bill Ackman, and a new CEO, Valeant is still fumbling. Its most recent report delivered a nearly 50% decline on the bottom-line and 10% on the top. With no signs of improving anytime soon, the upcoming quarter is shaping up to be another disaster. The Estimize consensus is calling for earnings per share of $1.72 on $2.51 billion in revenue. That projects as a 36% decline on the bottom-line and 10% on the top on a year-over-year basis.

Workday (WDAY) Information Technology – Software

Workday’s most recent report delivered mixed results; a miss on the bottom-line and right in line on the top. But what was most concerning is it marked another quarter that both earnings and revenue growth decelerated. This is a universal problem for many of the small to mid cap technology companies and one of the main reasons they suffer during earnings season. Even so, the stock is still up 15% year-to-date and 18.3% from a year earlier. In the past few months the stock has received a handful of downgrades from the likes of Citigroup, Needham and Wedbush.

Pier 1 Imports (PIR) Consumer Discretionary – Hotels, Restaurants & Leisure

The ongoing shift toward discount retailers has taken its toll on Pier 1 Imports. Consumers have become more attracted to value channels and online retailers leaving companies like PIR grasping at straws. Unsurprisingly, this systemic shift has put severe pressure on earnings growth. Over the last 2 quarters EPS has dropped over 100% year-over-year with revenue growth slightly below zero. The stock, as you might suspect, is down 10% year to date and 39% in the past 12 months. Unfortunately, these wounds won’t be healed in the upcoming quarter. Historically, shares drop 3% immediately following an earnings report and continue to drop for the next 30 days.

How do you think these names will report? Be included in the Estimize consensus by contributing your estimates here!

Every quarterly earnings season is filled with both winners and losers. Lately the losers have outpaced the victors, with next season shaping up to be another disappointment. Some of the biggest flops are expected to come from big names including Chipotle, Baidu, Valeant, Workday and Pier 1 Imports. According to the Estimize data these names are trending downward, owing to negative year-over-year growth estimates, heavy downward revisions and a history of missing expectations. The combination of these factors have typically led to a significant underperformance in the stock.

Chipotle Mexican Grill (CMG) Consumer Discretionary – Hotels, Restaurants & Leisure

Chipotle is still having trouble getting out from under the numerous health outbreaks starting in late 2015. The burrito chain which was once heavily praised as revolutionizing the fast casual sector is now largely an afterthought to a catalogue of other food chains, one being Shake Shack. Amidst the turmoil, earnings and traffic trends have taken a dramatic downturn. Last quarter comparable restaurant sales decreased a 3.6% on a 16.6% decline in total revenue. In an effort to regain customers, Chipotle has hit the ground running with new promotional campaigns and marketing initiatives. Some of these include Chiptopia which rewards customers for frequent visits throughout the summer. More recently, the company launched free kid’s meals on Sundays and complimentary beverages for students. While Chipotle continues to win back the hearts of its once loyal customers, investors have hammered the stock. Shares are down 12% year-to-date and 45% in the past 12 months.

Baidu (BIDU) Information Technology – Internet, Software & Services

Investors are slowly losing hope that Baidu will ever come close to Google’s success in the United States. The oft referred to Google of China is coming off of its worst quarterly report in nearly 8 years. Earnings reported a 39% decline from the same period last year while revenue dipped nearly 10% over the same timeframe. Baidu’s struggles in the second quarter were primarily driven by sluggish search advertising revenue. This downturn is expected to carry on through the third quarter and the rest of fiscal 2016. Analysts at Estimize are calling for earnings per share of 96 cents on $2.711 billion in revenue. Compared to a year earlier, this represents a 30% decline on the bottom-line and 6% on the top.

Valeant Pharmaceuticals (VRX) Health care – Pharmaceuticals

Valeant was one of the best performing stocks on Wall Street in the first half of 2015, but over the past 12 months price gouging initiative have sent shares plunging. After reaching highs of over $250 per share, the stock has plummeted over 90%, to all time lows where it is today.  The ongoing freefall forced management to oust now former CEO Michael Pearson, who led the company through the thick of it's price hikes. WIth several new board members, one being infamous hedge fund manager Bill Ackman, and a new CEO, Valeant is still fumbling. Its most recent report delivered a nearly 50% decline on the bottom-line and 10% on the top. With no signs of improving anytime soon, the upcoming quarter is shaping up to be another disaster. The Estimize consensus is calling for earnings per share of $1.72 on $2.55 billion in revenue. That projects as a 36% decline on the bottom-line and 8% on the top on a year-over-year basis.

Workday (WDAY) Information Technology – Software

Workday’s most recent report delivered mixed results; a miss on the bottom-line and right in line on the top. But what was most concerning is it marked another quarter that both earnings and revenue growth decelerated. This is a universal problem for many of the small to mid cap technology companies and one of the main reasons they suffer during earnings season. Even so, the stock is still up 15% year-to-date and 22.5% from a year earlier. In the past few months the stock has received a handful of downgrades from the likes of Citigroup, Needham and Wedbush.

Pier 1 Imports (PIR) Consumer Discretionary – Hotels, Restaurants & Leisure

The ongoing shift toward discount retailers has taken its toll on Pier 1 Imports. Consumers have become more attracted to value channels and online retailers leaving companies like PIR grasping at straws. Unsurprisingly, this systemic shift has put severe pressure on earnings growth. Over the last 2 quarters EPS has dropped over 100% year-over-year with revenue growth slightly below zero. The stock, as you might suspect, is down 18% year to date and 56% in the past 12 months. Unfortunately, these wounds won’t be healed in the upcoming quarter. Historically, shares drop 3% immediately following an earnings report and continue to drop for the next 30 days.

How do you think these names will report? Be included in the Estimize consensus by contributing your estimates here!

Yahoo Finance is tracking the stocks you’re following, based on your Yahoo Finance ticker searches.

Pfizer (PFE), Medivation (MDVN) — Pfizer is buying Medivation for $14 billion. Medivation’s portfolio includes Xtandi, a treatment for prostate cancer that generates about $2 billion in worldwide annual sales. The deal needs to be approved by shareholders and regulators.

Valeant Pharmaceuticals (VRX) — Zoetis (ZTS) Chief Financial Officer Paul Herendeen has stepped down to become executive vice president of finance at Valeant and will take over the role of CFO from Robert Rosiello effective immediately. Rosiello will stay at Valeant as executive vice president, corporate development and strategy.

Foot Locker (FL) — Citi (C) is bullish on the athletics retailer. Citi analyst Kate McShane picked Foot Locker as a top pick in the retail sector and raised the price target on the stock to $79.

Workday (WDAY) — Needham & Company downgraded Workday to hold from buy, citing a limited billings upside and a challenging financial market. Workday is scheduled to reports second quarter results on Wednesday.

AT&T (T) — The carrier set deals for roaming and direct connections in Cuba with a state-owned telecom firm. AT&T says customers will soon be able to “seamlessly connect with talk, text and data while visiting Cuba.” AT&T has not yet announced pricing.

Here are some of the stocks the Yahoo Finance team will be tracking for you today.

Medivation (MDVN) stock surged this morning. The cancer drug maker is being bought by Pfizer (PFE) in a deal valued at about $14 billion. That translates to $81.50 a share in cash. The deal is expected to close by the end of the year and will give Pfizer access to Medivation’s cancer drug pipeline. Pfizer terminated its $150 billion dollar deal to buy Allergan (AGN) earlier this year after the Obama administration issued new rules that would make a tax inversion deal less favorable.

US listed shares of Syngenta (SYT) soared in early trading following news that a US national security panel cleared government-owned ChemChina’s $43 billion takeover of the Swiss pesticides and seeds company. The two companies expect the deal to close by the end of the year. However, the tie-up is still subject to antitrust and other regulatory approval.

Facebook (FB) shares are in focus after Barron’s reported over the weekend that the social media giant’s stock has the potential to rise by more than 20% to $153 a share over the next year given the growing advertising revenue among its platforms.